ETF and ETP Market Trends – 2024 Flow & Tell

U.S. ETPs hit a new milestone in 2024: the industry gathered $1 trillion in new assets this year, topping the previous record of $903 billion in 2021. The flows peaked in November, with ETPs adding a record $155 billion for the month and averaged $7.3 billion daily. Post U.S. election, equity flows led the way, doubling October’s take, while fixed income ETFs held their own, racking up 34 consecutive months of inflows.

In the first week following the U.S. election, investors piled into risk across asset classes. An early and uncontested outcome unleased animal spirits after weeks of de-risking into the event by both the institutional and retail trading communities. The S&P 500 posted its biggest five-day rally in a year, while ETPs posted their largest week of inflows on record:

• U.S. ETPs added $22.3 billion the day after the election (relative to the $4 billion added following 2020’s election), and more than $55 billion over the subsequent week.¹
• Small caps punched above their weight relative to market cap, adding outsized inflows, while financials were the favored sector expression.

The year was a balancing act between historically attractive yields and demanding valuations – and investors turned to active management to navigate that. Active fixed income ETFs added over $100 billion in assets during the year. While active fixed income funds are relatively new additions to the ETF universe, they’ve captured outsized allocations. In 2023, active fixed income ETFs made up only 17% of total fixed income flows; in 2024, that share expanded to 36%.

For investors looking to take a more active approach to fixed income exposures, the iShares Flexible Income Active  ETF (BINC) seeks to offer access to sectors of the fixed income market that can be challenging to reach. Experienced, active management within fixed income can complement equities by offering diversified, potentially higher yielding assets that can help provide a ballast to sidestep a different subset of volatility and downside risks in the equity markets.

Investors reached for additional risk in 2024 as equity benchmarks largely posted double-digit gains — the S&P 500 cleared over 50 all-time highs while the Nasdaq, Nikkei, and other global analogs also registered new records in broad-based returns.² The positive performance translated to a resurgence of adoption for volatile exposures, with high-octane offerings seeing a pickup in flows. Leveraged, inverse, and single-stock ETFs captured their highest allocations since 2022, accounting for 13% of total ETF trading of the year.³

The theme for international investing in 2024 was “selectivity” as investors globally flocked to single country allocations over broad international funds. Flows into single country ETFs, or funds with an aim of providing exposure to a single country, were remarkably strong. Over the course of the year, investors added $185 billion in net assets to the space, nearly double 2023’s total.

Read more from our spotlight on Japan and insight on India.

After raising rates for 16 months, then being on pause for 14 more, September saw the start of the Federal Reserve’s easing cycle, with the FOMC delivering a 0.5% cut. Flows into enhanced income ETFs accelerated on the back of the bigger-than-expected cut, with BuyWrite ETFs adding $2.2 billion in September as investors sought to preserve high income in the face of lower cash rates. Income focused fixed income funds also netted flows, with iShares Flexible Income Active ETF (BINC) seeing positive inflows every month of the year.

China faced a challenging backdrop in 2024, struggling to jumpstart its economy amid a worsening real estate crisis. A surprising shift in tone came in September, followed by a slow rollout of monetary and fiscal policy measures to underwrite the government’s growth targets. Investors quickly turned to ETFs to gain exposure to the policy shift: China single-country ETFs gained $13.6 billion in assets the following month, completely reversing year-to-date outflows. However, some of the reach for China exposure was short-lived, with a steady string of outflows thereafter as investors reevaluated their holdings. Emerging markets ex-China exposures remained popular allocations. The exposure posted positive inflows on the year as investors stripped China out of broad benchmarks — EMXC, iShares MSCI Emerging Markets ex China ETF added an average of $600 million in inflows each month of the year.

Investors faced a volatile interest rate backdrop in 2024 as fluctuating economic data shifted Fed Fund rate expectations.⁴ The changing shape of the yield curve also contributed to shifting investors’ duration preferences. Intermediate-term Treasuries gathered the most flows across durations, up $35 billion year-to-date. Investors initially stayed away from short-term allocations at the start of the year, but the exposure saw a resurgence as the expected rate cutting cycle was further pared back. Despite relative underperformance, long-term fixed income gathered $28 billion inflows in 2024.

The first half of the year largely mirrored 2023’s performance, with tech and tech-adjacent names leading index gains. Growth outperformed value by nearly 20% over that period, buoyed by its overweight exposure to the tech sector, and ETF flows emphasized investor sentiment: growth ETFs netted six times the inflows of their value counterparts in the first half of the year.⁵ Notably, that preference unwound in the third quarter. Utilities, real estate, industrials, and financials all posted double-digit gains in Q3, and investors dialed up value allocations, ending six consecutive quarters of higher growth inflows.⁶ Notably, the shifting leadership spurred inflows into active solutions — investors utilized nimble exposures to help time their factor rotations, like the iShares U.S. Equity Factor Rotation Active ETF (DYNF).⁷

Learn more about factor investing.

Bitcoin, among other cryptocurrencies, was one of 2024’s strongest-performing asset classes. The price of Bitcoin gained over 135% in 2024 and crossed the $100,000 milestone for the first time amid bullishness in the space after the U.S. election.⁸ Spot Bitcoin ETPs have added a standout $54 billion of inflows, the bulk of which into the iShares Bitcoin Trust ETF (IBIT) with $33 billion of inflows. IBIT also reached $50 billion assets under management in 2024, making it the most successful ETP launch of all time.⁹

Learn more about investing in Bitcoin ETPs with iShares and learn more about getting exposure to Bitcoin and the benefits of using an exchange-traded product like IBIT.